The following pages comments are from several discussions posted on a web board, over the last 6
months pertaining to what other firms are doing in our industry. The conversations cover what firms may
be paying their traders and what some trader deals may look like, at different types of firms.
I’ve broken the firms into categories as follows: Prop shops, Arcades, Equity Trading Firms, Banks, &
Market Makers.
If the information is in a bullet point, it’s pulled directly from the Bboard.
My comments are in brackets [ ].
At the end I’ve listed proprietary trading firms I found on the Bboard with their respective links.
My purpose for this exercise is to look at other business models. How are traders getting paid at other
firms? Is there a better way to pay traders that would benefit them and GH? For example, could we go to
a bank business model that pays a trader a solid salary but very low pay out? I think it’s possible with the
Millennial Generation (b1982 – 2003) as they begin coming into the work place. Perhaps a salary of 5070k with 3-12% bonus of trading earnings? I’m simply brain storming.
Another purpose of this paper is to get ideas churning among us.
Prop Shops
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A top prop trader is closer to 75% of his pnl.
FNY and Trillium are pure prop shops.
Typical prop shop deal would be no base salary, assuming the same level of experience
as the bank trader 10mm book to actively manage. 50-75% payout.
The simple answer to comp is this: the more reputable shops pay a salary that is slightly below
what the street is paying now (you should factor in cost of living too because $42k in Chicago
equates to $80k in Manhattan apparently). People do not start out at these firms for the starting
salary. Over the short run for average to above average traders at a firm with winning strategies,
prop trading wins hands down.
I didn't realize people consider Optiver to be such a strong firm. The turnover at the firm
is insane. I'd equate it to dig a hole, fill it with water, add sharks, and throw in new hires,
promote those who survive, repeat until you have a senior trader. But then again, if you
are a good enough, quick enough trader (and lucky to some extent, of course) it is the
right firm for you.”
DRW is the same situation but in an earlier phase. about HALF of their entire company
has been with the firm for less than two years. they would rather hire the least succesful
people out of MIT/Wharton who are good at math than looking deeper into a big picture
of what would make a new hire a good trader. they attract people with a lot of perks and
care way too much about brand name. the business model of these places is to one day
become like a corporation so the founders get insanely rich, not good for a person
joining. also interesting to note that they do not fire even their worst traders. again this is
the problem with growing too big to handle and becoming complacent.
CTC is the only traditional type market maker usually referenced in the top 3 best. this
place is ran for the trader by the traders very lean and efficient. I would say that this
should be ranked ahead of SIG and DRW for this very reason. maybe even places like
transmarket should be above drw and sig. some really telling signs about ctc philosophy:
they spend all of their resources into research math models to better price options rather
than developing fancy software packages. they have hired the most legendary man in the
industry, natenberg (you will spend a few months studying his book at all of these
places), along with the associate director at uchicago financial engineering to lead
education. they put a lot of emphasis on more holistic qualities of new traders and have
smaller incoming number of trader assistants, which they only hire as they find
impressive people rather than taking in a fixed number every year like all other places.
Arcades
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Arcades are the modern day bucket shops which basically are making their money based on the
commission they charge you to trade in addition to any % of profits that they take. They want a
trader to be as active as possible without blowing out his account entirely. This creates a steady
revenue stream for them.
Equity Trading Firms
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The best firms are market makers. Market making is much much much more legitimate
than directional trading, because the market making firms have proprietary strategies that
have an edge. You are right in saying you can’t compare equities to equity options. The
intellect it requires to day trade equities is minimal. Firms that are successful trading
equities are firm that know how to correctly hedge as well, meaning fundamentally
driven hedge funds. With the exception of First New York Securites (since they use
derivatives to hedge, and also trade options, fx, rates, commodities, and equities, which
essentially makes them a multi-strat hedge fund), I don’t think equity day trading is a
good long term career move. Most of these equity trading firms are also the same firms
that offer minimal salary or no salary at all, and it is best to pursue careers at firms that
are willing to train you and offer a reasonable base salary. Obviously, given market
conditions, many will have to end up at these firms as a last resort, so I would say it is
certainly a completely different ball game. If you are interested in equities, it is best to
start at an IB, HF, or a firm like FNY.
THT is a decent shop - but you should note that they have a very high turnover rate and
they have been letting a lot of their current traders go lately. They also pay a 2k draw that
you have to qualify for, and if you have a negative month, you won't qualify for it. The
way the markets have been lately (very volatile) has definitely affected a lot of
speculative traders in both positive and negative lights. The way they trade is very very
short term scalping - they hold positions for seconds to minutes. They also don't hedge
positions. You could make a fortune or go broke very quickly. Additionally, you won't
make much money at THT during the first 2 years (you'll be lucky to be breaking even on
a cash-flow basis), but the 3rd year traders at THT (those that survive and make it to 3rd
years, that is) make about 250-300k on average.
THT is kind of a hard place to describe. You are correct about the turnover. When they
were a new shop, they gave new traders much, much more leeway in regards to losses.
Now, they seem to keep guys on a real tight leash at the beginning, let the
weaker/undisciplined guys go fast, and slowly increase the risk tolerance as guys get
more experienced. They do pay a 2k/month draw. I know for awhile they had some weird
delay on it, but I don't believe it's that way any more. I have never heard of the draw
being withheld due to a negative month. (What percentage of new traders are positive
their first months...2%?) Yes, guys there start out scalping, however there are guys that
do other stuff. Most of the Yes, guys there start out scalping, however there are guys that
do other stuff. Most of the scalpers there trade high flying stuff like FSLR, BIDU,
GOOG, GS, etc... Once trainees can scalp and learn execution, they allow them to swing
bigger. It's not at all uncommon for traders to hold overnight. There's different groups of
guys around the floor that trade other types of strategies. As far as take home pay, it
varies wildly, considering it's 100% performance based (after draw). Most of the people
there are out the door before they make any decent money. Assuming a guy makes it
through the learning curve for a year or two (~2/7 of traders hired), 150k-300k after that
is probably pretty accurate. Above that, there's another tier in the $500k-$1mill range.
There are a handful of guys that make multiple $ millions/per. If you're looking for a
place to teach you systematic, complicated equity strategies, you'll be disappointed with
THT. It's very much a sink or swim, individualistic type of place. That said, if you can
swim, they do give experienced traders $5-10 million to trade directionally intraday.
Banks
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At a bank a trader might see 8-10% of his pnl as his bonus for performance based compensation.
At a BB you start off as an analyst (traders bitch) and you essentially work for the trader. This is
where you earn your salary. Once you become a trader you will eventually switch to a primarily
performance based compensation. Prop guys at banks bonus' tend to be multiples of their base
salary.
Most banks charge their traders a desk fee also. This number is VERY LARGE. (1mm+
typically) which comes out of your pnl. Most prop shops do not charge a desk fee at all.
A prop guy at a bank might have the following deal:
150k base salary
Performance based bonus on a 100mm book 50mm long/50mm short. Might see 10% of
total profits.
Market Makers
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Jane St. and SIG are some of the top market makers. They take prop positions but their
primary revenues come from hedging.
[Trader’s rank firms]: I'm curious to hear how everyone would rank the top prop trading firms.
I've focused the post on firms in Chicago because that is where most of them are. Here is how
I've ranked them:
1. Spot Trading
2. Jump Trading
3. DRW Trading
4. Optiver
5. TransMarket Group
6. Peak6 Investments
7. Chicago Trading Company
8. Infinium Capital Management
9. Wolverine Trading
10. Tower Hill Trading
Honorable mention for firms outside of Chicago:
1. Jane Street Capital – NYC (considered to be the best)
2. Susquehanna International Group – Philadelphia (on par with CTC)
3. First New York Securities – NYC (on par with THT)
For anyone looking for a job let me list some more very good firms to check out.
Archelon Group
Equitec Group
Ronin Capital
Group One Trading
Cutler Group
Citadel (yes they have a big options group)
International Market Makers Collaborative (IMC)
Here is how I would shape up a top 10 list, and I did this based off of firms globally, since the
best firm is in NYC, not Chicago.
1. Jane Street
2. DRW
3. SIG
4. Optiver
5. Spot
6. Transmarket
7. Wolverine
8. Peak6
9. Jump Trading
10. First New York
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Comprehensive List of Proprietary Trading Firms
Advantage Futures
Alaron Trading
Allston Trading
Angle Group
Archelon Group
Assent
Barkley Trading
Bear Capital
Belvedere Trading
Benchmarq Trading
Blue Capital Group
Boss Trading
Boston Cabot (Chicago - 312-498-7041)
Breakwater Trading
Bright Trading
Cago Trading
Caliber Financial Management
Carlin Group
Capstone
Cheiron Trading
Chicago Trading
Chimera Capital
Consolidated Trading
Cornerstone Trading Group
Curvalue Financial Services Group
Cy Group
Darwin Capital Trading
Dayson Capital
Davis Securities
Dimension Brokerage
Dimension Capital Partners
DRW Trading Group
DV Trading
E-Brokerage
Echo Trade
Eldorado Trading Group
Epiphany Trading
Equity Trading Capital
Evolution Capital
Excel Trading
First North American Trading
First New York Securities
FCT Group of Companies
Flat Iron Trading
Fusionary Trading
Futex Group
Gator Trading Partners
Getco, LLC (Chicago)
Gelber Group
Gemini Capital
Genesis Securities
Geneva Trading
Golden Beneficial
Goldenberg, Hehmeyer & Co. (GHCO)
Golden Market
Group One Trading
Guardian Trading
Harrison Trading Group
Hanley Group
Harrison Trading Group
HLV Capital
Hold Brothers
Infinium Capital Management
International Trading Group/ DE Trading Corp
Jane Street Capital
JC Trading Group
Jump Trading
KC-CO II
Kershner Trading
Keystone Trading
Kingstree Trading
Last Atlantis Capital
League Trading
Lion Pride Trading
Liquid Trading (New York)
Lynx Capital
Mako Global
MBH Trading
MJL Partners
M&N Trading
MAREX Trading
Marquette Partners
Mazel Trading (Los Angeles)
Motive Capital
Nexis Capital (merged with Sperling to form T3 Capital)
Nico Trading
Next Level Trading
Optiver
Opus Atlanta
Peak6
Prestige Capital
Questrade
Refco Trading Services (Man Financial)
Remata Trading
Rho Trading Securities
RML Trading
Riverbank Capital
Ronin Capital
Rosenthal Collins Group
Saxon Financials
Schonfeld
SDV LLC
Semper Fi Trading
Simplex Investments
SMB Capital
SMW Trading Company
Sperling Enterprises
Spot Trading
Star Alliance Capital One
Swift Trade
T3 Capital (result of Sperling & Nexis merger)
Tibra Capital
Titan Securities
Title Trading
Tower Hill Trading
Trade Vision Group
Traders Capital
Trading RM
Transact Futures
Transmarket Group
Trillium Trading
Trinity Capital
Tuco Trading - SEC Action
Yourika Capital
Xerxes Trading
Van der Moolen (US & Europe)
Vankar Trading
VTrader Group
Velez Capital
Wasserman Capital
Wescott Group
Wolverine Trading
World Trade Securities
Zinc Trading
Z-Marc II